The Diamond-Mortensen-Pissarides Contribution to Economics

Abstract

The Prize in Economic Sciences in Memory of Alfred Nobel 2010 was awarded jointly to Peter Diamond from Massachusetts Institute of Technology, Dale Mortensen from Northwestern University and Christopher Pissarides from London School of Economics and Political Science «for fundamental contributions to search and match ing theory», established in 70–80s of the last century, and constituting now the core of modern economics. The most important application of this approach has become the analysis of labour market with search costs or «frictions» that potential workers and firms face in their attempts to locate each other. The original approach has provided the basis for the study of equilibrium unemployment dynamics in terms of flow vari ab­ les (eg. monthly measured numbers of new vacancies and unemployed, hired and firedworkers, etc.). It has enabled researchers to conduct both positive and normative analysis of the labour market and social welfare in terms of concrete policy measuresand instruments, such as unemployment benefits, hiring and firing costs, minimum wage laws, etc.